Guest Article 2008 Year-End Retirement Plan ChecklistBy Robert J. Higgins, JD CEBS AIFA. Mr. Higgins is the lead consultant for the Fiduciary Services practice of Benefit Plans Plus, where he is responsible for assisting clients in defining and fulfilling their ERISA and investment fiduciary duties. He has published articles, made live and internet presentations to local, regional and national audiences. He has more than 28 years of experience in the qualified plan business with several major regional and national organizations. For more information contact Bob at 314.983.1358 rhiggins@bpp401k.com. Annual Notice Requirements Depending on the type of qualified plan and the plan's features, one or more annual notices may be required. Please carefully review the list of annual notices below to confirm if any are required to be issued for your plan. Safe-Harbor 401k Annual Plan Notice
The traditional safe-harbor, contingent and supplemental notices must be provided at least 30 days and no more than 90 days prior to the beginning of the plan year. Thus, calendar year plans will need to provide the applicable notice by December 2, 2008. Qualified Default Investment Alternative ("QDIA") Notice A QDIA is an investment alternative (for example, a balanced fund or target-date fund) in a participant-directed 401k or profit sharing plan into which participant contributions are "defaulted" if the participant has not made an affirmative investment election. A plan fiduciary who properly selects a QDIA and follows the specific QDIA requirements, including initial and an annual notices, will generally receive fiduciary protection for those defaulted investments under Section 404(c) of the Employee Retirement Income Security Act of 1974 (ERISA) because participants will be "deemed" to have elected to invest their contributions into the QDIA. Participant-directed 401k or profit sharing plans must provide an annual notice to all participants that have been defaulted into a QDIA. The notice must be provided at least 30 days before the beginning of each plan year. For calendar year plans, notice must be provided by December 2, 2008. Note: One of the QDIA notice requirements is that it be "separate" from other notices that are provided. However, the QDIA notice may be (but is not required to be) combined with the safe-harbor notice described above and the automatic enrollment notice described below. 401k Plan Annual Automatic Enrollment Notice Sponsors of 401k plans that automatically enroll participants must provide annual notices to all eligible employees describing the circumstances under which contributions will be automatically contributed to the plan. The notice must be distributed at least 30 days prior to the beginning of each plan year (December 2, 2008 for calendar year plans), and may be combined with the QDIA notice described above. Note: A number of different automatic enrollment arrangements, but all of them require a notice. Defined Benefit Pension Plan Annual Funding Notice Plan sponsors of single and multiemployer defined benefit pension plans must provide an annual funding notice to participants, beneficiaries, and labor organizations representing participants. The notice must contain certain information about the plan, including, among other items, the plan's funding status for the previous two years and a statement of the plan's assets and liabilities. The notice must generally be provided within 120 days following the end of the plan year. Small plans (covering fewer than 100 participants) must provide the notice by the filing due date of the plan's IRS Form 5500. Additional notice requirements apply if the plan is subject to benefit restrictions due to failure to meet certain funding targets. For calendar year plans, the first notice is due on April 30, 2009. This notice will take the place of the summary annual report for a defined benefit plan. Participant Benefit Statements Depending upon the type of qualified plan, specific participant benefit statement requirements apply, as described below.
Plan Amendments While amendments to comply with the Pension Protection Act of 2006 are generally not required to be adopted until 2009 (or later in some instances), certain plan amendments relating to discretionary or other compliance changes may be required to be adopted before the end of the plan year. Please review the list below to confirm if any of the plan amendments may apply to your plan. Discretionary Changes Plan amendments for discretionary changes (i.e., changes not required by law, such as plan design changes) must be adopted by the end of the plan year in which the amendment is effective. Thus, calendar year plans must adopt any discretionary changes by December 31, 2008. Code Section 415 Amendments Qualified plans (including both defined contribution and defined benefit pension plans) must be amended to comply with the final regulations under Section 415 of the Internal Revenue Code of 1986, (415 amendments). The final regulations are effective for limitation years beginning on or after July 1, 2007 (e.g., January 1, 2008 for plans with a calendar year limitation year). The regulations include two types of changes. "Mandatory" changes must generally be adopted by the later of (i) the last day of the plan year during which a plan amendment is effective, and (ii) the due date for filing the employer's tax return (plus extension) for the fiscal year during which the provision became effective. Deadline-Mandatory Changes: Mandatory 415 amendments for plans that have a calendar year limitation year and a calendar year fiscal year must be adopted by the due date plus extensions for the employer's tax year ending December 31, 2008. "Discretionary" changes are changes that a plan sponsor can choose whether or not to adopt and must be adopted by the end of the plan year in which they became effective. Deadline-Discretionary Changes: Discretionary 415 amendments for plans that have a calendar year limitation year and a calendar year fiscal year must be adopted by December 31, 2008. Pension Funding Equity Act Amendments for Defined Benefit Plans The Pension Funding Equity Act (PFEA) generally changed the actuarial assumptions used for determining the Code Section 415 limits for lump sum distributions made in 2004 and 2005. Amendments to adopt PFEA changes must be made by the end of the 2008 plan year. Thus, calendar year plans must be amended by December 31, 2008 to reflect PFEA changes. Required Minimum Distributions Participants (and certain beneficiaries) who have attained age 70.5 during or prior to 2008 may be required to withdraw a certain amount from their retirement accounts each year. This amount is referred to as a Required Minimum Distribution (RMD). Failure to withdraw an RMD by the deadline will result in an IRS excess accumulation penalty of 50% of the shortfall. Owners Those who own more than 5% of an organization sponsoring a plan with assets in a qualified plan, 403(b) account or 457 plan, must take an RMD from the account(s) if you are at least age 70.5 in 2008. If 2008 is the year you reached age 70.5, you have the option of delaying the initial RMD until April 1, 2009. This option to defer until April 1, 2009, applies only to your first RMD. However review this option with your tax advisor because your will have to distribute your 2009 RMD by December 31, 2009. Non-owners For qualified plans, 403(b) and 457 plans, you may defer beginning your RMD past age 70.5 until after you retire, provided the option to defer is allowed under the plan. Check with your plan administrator. Beneficiaries If you are the beneficiary of a retirement account, the following may apply to you:
IRS Determination Letter Program Under the IRS's determination letter program, individually designed plans have staggered, five-year remedial amendment cycles. While not a year-end deadline, the period for submitting individually designed plans in the third remedial amendment cycle (Cycle C for employers with employer identification numbers that end in 3 or 8 and most governmental plans) began February 1, 2008 and ends January 31, 2009. Thus, plan sponsors with individually designed plans in Cycle C should begin (if they haven't already) to amend (and possibly restate) their plans and to gather the other information required for the filing in order to ensure timely submission to the IRS. Employers adopting a pre-approved Volume Submitter or Prototype plan will be on the same remedial amendment cycle as their document sponsor. Most of these sponsors have a deadline of April 2010 to restate. Check with the sponsor of your document now to be sure you adopt a timely plan restatement. Written Plan Document Deadline for Code Section 403(b) Plans Final regulations under Code Section 403(b) were issued last year and, among other things, require that all 403(b) arrangements be maintained pursuant to a written plan document. Sponsors of Code Section 403(b) plans will need to update existing plan documents or adopt new plan documents by December 31, 2008 to comply with these final regulations. Other articles by Robert J. Higgins: Using a Fiduciary Charter as the Framework for Your Plan Operations and Cruise Control vs. Auto Pilot: The Need for a Third Party Review of Plan Fiduciary Functions. ### 401khelpcenter.com is not affiliated with the author of this article nor responsible for its content. The opinions expressed here are those of the author and do not necessarily reflect the positions of 401khelpcenter.com. This article is for informational and educational purposes only and doesn't constitute legal, tax or investment advise. | ||||
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